Manchester City have ended their interest in Alexis Sanchez as they feel the potential deal has become too expensive, according to Sky sources.
It is understood City would have had to commit to spending in excess of the £60m deal they provisionally agreed with Arsenal in the summer to compete with offers already on the table for the forward.
Pep Guardiola had talks with City chairman Khaldoon Al Mubarak on Monday and both agreed the deal was excessive for a player available on a free transfer at the end of the season.
To match other offers for Sanchez, City would have had to agree to make him the highest paid player in their squad. Sky Sports News understands Manchester United, on the other hand, are prepared to pay Sanchez more than £350,000 per week.
Despite United's interest, City are understood to believe the Arsenal forward would prefer a move to the Etihad.
However, their need to add to their strikeforce has been reduced by the news that Gabriel Jesus is likely to be fit again in a fortnight.
He was initially expected to be out for up to two months after suffering a knee injury at Crystal Palace at the end of December.
City also feel that adding another forward could upset the equilibrium in a squad that has won 20 out of 23 Premier League matches this season.
While it appears City have admitted defeat in their pursuit of Sanchez, Guardiola still wants to add a centre-back during the January transfer window.
City have enquired about Jonny Evans, and he is still one of the defenders that is interesting Guardiola.