May 3 (Reuters) - Euro zone yields dropped on Friday ahead of U.S. jobs data and were headed for a weekly fall after Federal Reserve Chair Jerome Powell suggested rate cuts remained on the table, soothing fears of a possible hike by the U.S. central bank.
Money markets are pricing in 70 basis points (bps) of European Central Bank monetary easing in 2024 , and 39 bps for the Fed.
Germany's 10-year bond yield, the benchmark for the euro zone, fell 2.5 bps to 2.53% and was set to end the week 5 bps lower.
The yield spread between U.S. 10-year Treasuries and German bunds - a gauge of the expected policy path divergence between the ECB and the Fed - was flat at 205 bps.
The German two-year bond yield, more sensitive to expectations for ECB policy rates, was down 2 bps at 2.97%.
Italy's 10-year yield was 3 bps lower at 3.84%.
The gap between Italian and German 10-year yields - a gauge of the risk premium investors ask to hold bonds of the euro area’s most indebted countries - tightened by 1 bp to 131 bps. (Reporting by Stefano Rebaudo; Editing by Jamie Freed)
