Must agree that UK is in that 'sweet spot' between announcing reductions in spending (and so getting the credit for them from optimistic markets) and actually carrying them out (with all the associated pain and loss of political capital).
In reality, the axe hasn't even begun to swing yet. The scale of what is required to carry out 25% cuts is enormous. Every project that gets mentioned in the papers comes with complaints from each lobby: be it aircraft carriers, troop numbers, schools buildings, hospitals, public sector pensions, arts budgets, embassy closures etc. The only thing I've not heard complaints about is housing benefit cuts.
Once the axe begins to fall (coincidentally around the time that Labour will get a new leader) then we'll see genuine testing of the political resolve of the new Government. Cracks in that resolve will hurt the pound no doubt.
As an aside cuts to housing benefit may have an enormous impact on the housing market. As I understand it, under the current system you, my friend Mr A may be unemployed and on housing benefit and you can agree to rent a house from me, Mr B, for £X00. Now £X00 may be £Y00 more than the going rent but the housing benefit people don't query it too much. DHSS pays your rent to me and I might even feel inclined to give you half of £Y00 for being part of the scam. Isn't that more or less the £2000 a week asylum seeker story?
I had conversations about that with my team this week. None of my team earn over £25,000. Seeing someone getting paid £2000 a week housing benefit means it is more difficult to motivate them to work for that amount per month (before tax)....