Bund yields on track for weekly fall before German inflation data

May 30 (Reuters) - Euro zone benchmark Bund yields were on track for a weekly decline before German inflation data due to be released later in the session, as investors focused on the long-term adverse economic impact of U.S. trade policy.

Germany's 10-year government bond yield DE10YT=RR, the euro area benchmark, was down one basis point (bp) at 2.504%, a three-week low. It was set for a 6.5 bps weekly drop.

Markets are pricing in a 90% chance of an ECB 25 bps rate cut next week. They also indicated a deposit facility rate at 1.67% EURESTECBM5X6=ICAP in December, implying two rate cuts and an around 30% chance of a third easing move.

The benchmark 10-year U.S. Treasury yield US10YT=RR was up 0.5 bps in London trade after declining on Thursday on soft economic data and on the back of a court ruling blocking most of President Donald Trump's tariffs, which fuelled fears over prolonged trade policy uncertainty.

A federal appeals court temporarily reinstated the most sweeping of Trump's tariffs on Thursday.

Italy's 10-year yield IT10YT=RR fell one bp to 3.493%, its lowest level in almost three months. The gap between Italian and German yields DE10OT10=RR was at 96 bps, after reaching 89.80 bps on Thursday, its narrowest since February 2021.