Arsene Wenger has stated that he is "optimistic" that Theo Walcott will sign a new contract to remain at the club and added that he will not sign "average" players,
The Arsenal manager is keen to secure the long-term future of Walcott and has been in contact with the wingers advisors for some time as they attempt to convince him to remain at the club beyond the end of the season.
Walcott has been in sensational form and the contract wrangling appears to have had very little effect on his performances.
The 23-year-old is believed to be asking for a five-year contract and an increase to around £90,000-a-week which would put him in line with the very top earners at the club and it seems he could be close to receiving a satisfactory offer.
"We are on a good road," said Wenger, "In this situation as long as nothing is signed, you are cautious. However, I am optimistic we will get to a happy conclusion."
Wenger has always remained confident that Walcott will extend his deal and he added: "Discussions are progressing slowly, but smoothly."
The long-serving Arsenal boss was also quizzed on whether it was likely that any new faces would arrive this month and he suggested that the club were looking, but it would only be for a special talent.
"We still work on the transfer market, but do not want to bring in average [players]," he added.
One name that has been linked with a move to a Premier League club is Sevilla striker Alvaro Negredo but Wenger insisted that there was "no interest" in the Spanish forward.
Having already loaned out Johan Djourou and Marouane Chamakh, it does not seem that Arsenal will be letting any more players leave during the January transfer window.
Andrey Arshavin and Sebastien Squillaci have both been linked with a move away from the Emirates but Wenger admitted that there was "no news" on any interest from other clubs.
Arsenal face Manchester City at the weekend in a massive game that starts a sequence of six matches in just 18 days and Wenger knows just how important picking up all three points would be.
He said: "It is vitally important as we are on a positive run and very confident. Another positive result will give the squad even more confidence and show them that we can push on."