I asked this in askhistorians as well but it’s not active (it should be though!).
The average (or presumably median) European would have been illiterate and would not have ventured more than a few miles from their place of birth within their lifetime, so if news of newly discovered lands reached them, it would have done so very slowly, and been distorted into implausible folktales of marvels and monsters.
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I’d like to point out that the notion that most medieval Europeans never travelled beyond their place of birth is increasingly shown to be a misconception. Most peasants at least visited the nearest town frequently for trade and to attend processions for religious holidays, and many made a point of going on a major pilgrimage at least once in their live. There also the fact that people were often forced to relocate because of wars and famine, went on crusades, were sent away to learn a trade, or simply visited distant relatives. The thing that didn’t happen was tourism, which is how we mostly think of travel today. Here’s a medievalist’s perspective on it, and it’s not hard to find more sources if you go looking for them: https://medievallauren.wordpress.com/2020/12/02/medieval-myth-busting-travel/
New-worlder here. We definitely have monsters.
