The euro slumped to a multi-month low against the dollar on Friday, pressured by a combination of factors including persistent worries about the Eurozone’s economic health and the widening gap in monetary policy between the European Central Bank (ECB) and the U.S. Federal Reserve.

Analysts pointed to the ECB’s increasingly dovish stance, with expectations mounting for further easing measures in the near future, as a key driver behind the euro’s weakness. Conversely, the dollar has been bolstered by growing anticipation that the Federal Reserve will soon begin raising interest rates.

The divergence in monetary policy outlooks has created a significant yield differential, making dollar-denominated assets more attractive to investors. This has fueled capital flows into the U.S., further strengthening the dollar and weighing on the euro.

The euro’s decline could have implications for the Eurozone economy. While a weaker euro can boost exports by making them more competitive, it can also lead to higher import prices, potentially fueling inflation. The ECB will be closely monitoring the situation as it considers its next policy moves.

Market participants are now keenly awaiting upcoming economic data releases from both the Eurozone and the U.S., which could provide further clues about the future direction of monetary policy and the euro-dollar exchange rate.