As anticipated, markets were transfixed on the FOMC policy meeting overnight, and once again walked away empty handed. While the Fed kept rates at record lows between 0 to 1/4 percent and reiterated interest rates are likely to remain at "exceptionally low levels at least through late 2014," the statement failed to provide and immediate relief for those expecting further stimulus. The ensuing correspondence did however keep the dream of QE3 alive with the statement showing the board are willing to "provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability".

Risk trends displayed clear disappointment in the period to follow with the US dollar a natural beneficiary. After consolidating higher before the release, the Aussie dollar hit the skids with an immediate drop through 105-figure before bottoming out just below 104.5 US cents throughout the session.  The Euro followed a similar trajectory, falling from around 1.23-figure before finding support above the 1.2215 levels.

The effectiveness of further stimulus also continues to be brought into question given borrowing rates are at record lows. This suggests that while QE3 may provide a superficial boost or short-term sense of euphoria for markets, it's unlikely to directly influence structural issues such as the high rate of unemployment and weakness in the housing sector. With U.S mortgage rates in some cases as low as the 3-4 percent region, it's clearly never been a more cost effective time to borrow, however, given the housing bubble and subsequent global economic crisis, high unemployment and low credit worthiness has made the dream of owning a home illusive for many U.S citizens as lenders maintain conservative risk profiles.

Earlier, the latest ISM release also provided another less than convincing view of the health of U.S manufacturing with the gauge edging higher to 49.8 in July, but remaining in contraction territory. Forecasts called for the stronger gains to 50.2. A slight concession was the earlier release of ADP employment data which added 163,000 new private sector jobs in July, outpacing expectations of 120,000 new positions. This is seen as a positive pre-cursor ahead of Friday's Non-farm payroll data.

With the FOMC in the rear view, markets now move to this week's next significant risk event with the European Central Bank policy meeting this evening, and it's clear the bank has a lot to live up to. Mario Draghi's pledge to do "whatever it takes to preserve the euro" has inspired a material shift in sentiment, but if markets walk away unappeased, it's likely to spark another bout of top-tier risk aversion.

The day ahead will see the focus turn to local retail sales which is expected to see seasonally adjusted growth of 0.7 percent in June, from a previous rise of 0.5 percent. Also on this morning's docket is trade balance data with the deficit forecast to widen from AUD285 to 375 million. At the time of writing the Australian dollar is buying 104.6 US cents.

For more market commentaries please visit www.gomarketsaus.com