Aug 23 (Reuters) - Euro zone government bond yields were

set to end the week roughly unchanged as a rise after Thursday's

economic data offset the previous fall.

Borrowing costs snapped a four-day falling streak on

Thursday, while bets on the European Central Bank's easing cycle

held steady after the euro area's figures.

Euro zone fixed income markets tracked moves in U.S.

Treasury yields, which dropped as investors expected dovish

remarks from Federal Reserve Chair Jerome Powell at Jackson

Hole, due on Friday at 1400 GMT.

Germany's 10-year yield was up 0.5 basis points

(bps) at 2.25%. It was set for a one bp weekly fall.

Some analysts argued that Powell's testimony risks being a

non-event as it has been in focus for weeks.

They said the bar for a dovish surprise was quite high, with

markets pricing in 97 bps of Fed rate cuts by

year-end and 190 bps by July 2025.

Money markets kept pricing around 65 bps of ECB rate cuts by

year-end, implying two easing moves and a

60% chance of a third cut.

"Our June projections assumed two more rate cuts this year,

and right now, I don't see any reason why we shouldn't follow

through," ECB policymaker Martins Kazaks said on Friday.

Euro zone consumers' inflation expectations over the next 12

months remained steady for the third month in July, an ECB

survey showed on Friday.

Investors were still assessing the impact of Thursday's

economic figures.

Analysts said the positive impact of the Paris Olympic Games

on French service sector sentiment, which rose by 4.9 points to

55.0, was a key - and probably temporary - driver of the

positive surprise in the euro area PMIs.

Euro zone negotiated wage growth slowed to 3.55% in the

second quarter from 4.74% three months earlier, primarily

because of a major slowdown in Germany.

"For the third quarter, this index (a Citi wage tracker)

suggests a sharp re-acceleration in German negotiated wages

growth from 3.4% back to 5.7%, mainly due to a 1,000 euros

one-off payment in the wholesale sector in August," said

Christian Schulz, a European economist at Citi.

He argued that the second quarter decline was entirely due

to a drop in German wage growth, driven by volatile one-off

payments.

Italy's 10-year government bond yield, the

benchmark for the euro area's periphery, dropped one bp to

3.60%, with the yield spread with its German peers

at 135 bps.

The gap between German and French borrowing costs, a gauge

of the risk premium investors demand to hold France's government

bonds, was at 71 bps. It hit 88 bps in early August, its highest

since 2012, and reached 85 bps during French elections.

Investors are closely watching political developments in

France as President Emmanuel Macron faces a tough job.

Parliamentary approval of the 2025 budget is one of many

challenges at a time when France is under pressure from the

European Commission and bond markets to reduce its deficit.

Macron began meeting party leaders on Friday with the aim,

nearly seven weeks after inconclusive parliamentary elections,

to finally give the country a new prime minister.