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The Portuguese manager was reportedly approached to become the new Everton manager, which has subsequently been rejected by Watford.
The Merseyside club are on the lookout for a new manager after sacking Ronald Koeman in October.
The former Hull manager has enjoyed a good start at his new club, with Watford lying 9th in the Premier League table while Everton are 15th.
Watford's last game was a 3-2 defeat at Goodison Park which saw caretaker manager David Unsworth earn his first win at the helm.