The Hornets do not currently plan to make any more signings once the loan window reopens next week after deciding against pursuing their interest in Chelsea's Lewis Baker.
Watford had been looking for another centre midfielder, ideally a young home-grown player.
And we understand they had been considering a move for the talented Baker for several weeks but we have been told the club have now decided against continuing their interest.
The Gazette in Middlesbrough have reported Chelsea are reluctant to let the 19-year-old leave on loan at the moment as he is providing cover for the first team, and it is unclear if that is a factor in the Hornets' decision.
But Aitor Karanka, who was Blues' boss Jose Mourinho's assistant at Real Madrid, remains keen on Baker, who if signed, would become the fourth Chelsea player to join the club on loan - with Jamal Blackman, Kenneth Omeruo and Patrick Bamford also signed.
Baker is an attacking midfielder who last season was named the club's young player of the year and player of the tournament by the NextGen Series, which is a competition involving some of the biggest clubs in Europe.
At the weekend the Luton-born player signed a new five-year contract at Stamford Bridge and Mourinho has said if Baker doesn't become an England player in the future, then the Chelsea manager will be to blame.
Watford had also been looking at signing a left back but have decided it is not necessary after academy graduate Tommie Hoban impressed in the role when Daniel Pudil was rested.
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