Manchester City boss Pep Guardiola feels his side must improve further if they are to challenge for the Champions League title this season.

City secured a 2-1 Manchester derby win at Old Trafford on Saturday despite the absence of star forward Sergio Aguero, with defender Vincent Kompany and midfielder Ilkay Gundogan still yet to feature as they continue to work their way back to full fitness.

Guardiola’s side open their Champions League account in earnest on Tuesday after coming through qualifying as they host Germany’s Borussia Monchengladbach.

City have been handed a tough draw with Barcelona and Celtic completing Group C and Guardiola feels further improvement is needed if the Premier League club are to go all the way in Europe this term.

“Until now, in the Premier League it has been okay,” he told reporters. “But to compete against the best clubs in Europe, in this moment with the way we are playing, we are not able to.

“We have played part of most of the games at a high level, and of course we have to continue. “If you ask me whether we are ready to compete in Europe, we are not ready.

We create, but in front we need more. “But it is just two months together, so we have time to get better.”

City are now the last remaining side with a 100% record in the Premier League and they are 1.91 to win the title, while United are now 5.50 after their first defeat.

City are 1.40 to beat Gladbach, the Bundesliga hopefuls can be backed at 7.00 and a draw is 4.75.