Despite political discussion between incoming German Prime Minster Friedrich Merz and the SDP to increase defense spending, Germany's Bunds followed United States Treasuries marginally higher as eurozone negotiated wage growth moderated in Q4, said Daiwa Capital Markets.

With the European Commission's flash eurozone consumer confidence indicator recovered to a five-month high in February (-13.6), Wednesday's German and French indicators are both expected to show a similar trend, noted the bank. In particular, the German GfK consumer survey -- presented as a forecast for March -- might have received a pre-election boost, although United States rhetoric on European trade and security might minimize the potential improvement.

Meanwhile, the French INSEE survey for February should also see another small uptick after the Budget adoption marked a welcome break from its recent political disorder, stated Daiwa.

While the United Kingdom energy regulator announced a chunky hike in household energy tariffs in April, Gilts also followed USTs higher as a retail survey signaled ongoing weakness in spending, added the bank.

It's set to be a quiet day on Wednesday on the data front in the U.K. The Bank of England's MPC's "uber-dove" Swati Dhingra is due to deliver a speech on 'Trade fragmentation and monetary policy' to the National Institute of Economic and Social Research (NIESR).

While the February Monetary Policy Report noted that the BoE's updated macroeconomic projections weren't conditioned on the potential impacts of new tariffs implemented by the U.S., with the threat of reciprocal tariffs now being levied, her comments may provide some insight into how trade risks are factored into the MPC's inflation outlook, according to Daiwa.