Newcastle United have already had an opening bid of around £20 million rejected by Watford, but Eddie Howe and the Newcastle board still believe an agreement can be found.
The Magpies were told by the Championship outfit that their initial offer of £20 million plus £3 million in add-ons did not meet the club's valuation, before making it clear that the player is not for sale this summer.
Watford desperately want to keep hold of Pedro beyond this summer - after losing Emmanuel Dennis to Nottingham Forest, and strong links that Ismaila Sarr will depart from the club, but Newcastle have still made an improved offer for the 20-year-old regardless.
Newcastle's improved offer for João Pedro
It is understood that a new bid of around £30 million has been placed on the doorstep of Watford owner Gino Pozzo. This new offer is still expected to be short of the valuation set by the Watford board, but there is confidence a compromise can be agreed upon.
With that being said, João Pedro has not handed in a transfer request, but his representatives and himself would feel quite disappointed if Watford received a good offer and stood in the way of a potential deal that would see him back playing in the Premier League.
Joao Pedro has attracted a lot of interest from clubs in England and abroad since he joined the Hornets in the January transfer window of 2020. Pedro is a product of the Fluminese academy, which is also where fellow Brazilian, Richarlison began his footballing career.
Before joining the Hornets, he netted 10 goals in 37 appearances for the Brazilian outfit Fluminese, before grabbing nine goals and three assists for the Hornets as they earned promotion back to the Premier League the following season.
Last season, he scored a total of just three goals, with one of them goals coming in a 1-1 draw against Newcastle at St. James' Park, as Watford got relegated from the top flight and went back down to the Championship at the first time in asking.
He has since featured in all of Watford's opening games so far this season and scored the winner in the 1-0 win over Sheffield United in the Hornet's opening game of the season at Vicarage Road.
The Magpies who are strong admirers of the 20-year-old would see him as an ideal addition to the squad, who can play in multiple forward positions as they continue to search for attacking reinforcements.
Dan Ashworth, who is the current Magpies sporting director is said to have a long-lasting interest in the Watford player and even considered him as a target at his previous club, Brighton & Hove Albion.
Watford manager on the future of Pedro
The Watford manager spoke to the media after Watford's draw against Birmingham on Tuesday night and discussed the future of the 20-year-old, amid interest from Newcastle.
Rob Edwards said: "João Pedro is already a very good player, and I think he is going to be an excellent footballer. I do believe this is the right place for him at the moment. I think he would really benefit from playing a full season with us and obviously helping the football club to where we want it to be."
"I think he can play a huge part in that. I think he's fully committed to that. He's so mature for a young age, and he understands what we need to do as well. Joao is fully committed on the here and now, and he can't control anything that happens externally."
Watford looking at a possible Pedro replacement
Watford are believed to be highly interested in forward player Matheus Martins, who currently plays for Fluminese - which is the club Pedro previously has played for before joining Watford. Martins has scored two goals in 18 games this season playing in the Brazil, Serie A.
Though, it is important to note that if the deal is to go through - he would arrive during the January transfer window or even later, as the Brazil transfer window is presently shut.