(Adds detail, comments, updates prices)
By Polina Ivanova
LONDON, Nov 3 (Reuters) - Sterling rebounded modestly on Friday after its biggest one-day fall since the aftermath of June 2016's Brexit vote, with robust services data barely cushioning the blow from the Bank of England's pushing-back of rate hike expectations on Thursday.
Despite the Bank raising rates for the first time in over a decade, it also told markets to expect only two further hikes in the next three years. sent the pound sliding by almost 1.7 percent on a trade-weighted basis - its poorest showing since June 27, 2016, in the aftermath of Britain's shock vote to leave the European Union =GBP - as markets pushed back their bets on when the BoE would next hike rates to November 2018.
Data showing Britain's dominant services sector growing at its fastest rate in six months gave the pound a modest lift on Friday, with the currency trading up 0.2 percent at $1.3090.
But that still left it down well over 1 percent against the dollar since the BoE's policy decision. is certainly encouraging to see the services sector expanding... It helps that the UK data is not falling off a cliff, that the economy is doing ok," said Valentin Marinov, head of G10 currency research at Credit Agricole (PA:CAGR).
"That stagflation concern, that erosion of the real purchasing power of the UK consumers, is becoming less of a concern - that's actually good for growth even though it means that ultimately the BoE doesn't have to hike rates anytime soon," he said.
Sterling was also trading 0.4 percent up against the euro EURGBP=D3 on Friday, after suffering its worst one-day drop on Thursday against the single currency since a "flash crash" on Oct. 7, 2016, when a sudden plunge briefly shaved a tenth off the pound's value.
"Were it not for well above target inflation it appears highly unlikely that yesterday's historic hike would have occurred and the pound remains susceptible to further declines going forward," said David Cheetham, chief market analyst at X-Trade Brokers.
BoE Deputy Governor Ben Broadbent said on Friday that the Bank's signal that it may need to raise interest rates two more times is "not a promise", responding to a question about the BoE's previous attempts to signal the likely path for interest rates.