Arsenal have suffered a huge setback in their pursuit of right-back Javier Manquillo after reports in Spain claimed Liverpool are now in pole position to complete the signing of the talented Atlético Madrid youngster.

Last week, IBTimes UK reported the Reds had joined the race to sign Manquillo after Brendan Rodgers unsuccessfully tried to secure the defender's services during the January transfer window with an £8m bid.

We first claimed the Gunners had been in negotiations with Atlético Madrid to secure the loan of the 20-year-old right-back since the beginning of the month – with Arsene Wenger's demand for an option to make the deal permanent at the end of the season the only stumbling block, as the Spanish giants don't want to part with one of their most promising talents.

But when Rodgers got wind that Atlético were keen on loaning Manquillo to Arsenal, the Liverpool manager renewed his interest in the right-back.

Sources close to the negotiations have claimed to IBTimes UK that both Arsenal and Liverpool are negotiating a deal – with Atlético insisting in assuring his long-term future at the Vicente Calderón either by loaning him to one of the Premier League clubs or by selling him with a buyback clause.

Manquillo expects to complete his move to one of the Premier League sides before the end of the week while Spanish newspaper AS claims Liverpool are the main candidate to secure his services.

The Spanish newspaper says that following Mathieu Debuchy's arrival to north London, Manquillo would rather to move to Merseyside as he understands he will be able to gain more playing time there.

Manquillo is considered one of the most promising right-backs in La Liga: he's played regularly for Spain's Under-20s and was part of the Under-19 European Championship-winning team in 2012.