By Alex Stevens

Pep Guardiola is poised to announce next week he is leaving Bayern Munich – and Carlo Ancelotti is set to replace him, Football Insider sources understand.

Guardiola, whose contract expires at the end of the season, has informed the Bayern hierarchy of his decision to leave the club.

A source has told Football Insider that Ancelotti is in discussions with German champions to replace the Spaniard at the Allianz Arena.

An announcement to confirm Guardiola will quit is expected within the next week in a move that will have major repercussions for Premier League clubs.

City are the favourites to land Guardiola after making discreet enquiries about his availability and are hopeful a deal can be formalised before there is a further stampede for the 44-year-old’s services.

But Arsenal and Chelsea are also monitoring the former Barcelona manager’s availability

In August, City only extended the contract of current manager Manuel Pellegrini until 2017, but the compensation bill facing the club if they were to terminate it a year early would not put them off doing so.

As revealed by Football Insider, Arsenal have not given up hope of enticing the Spaniard although the timing would depend upon when Arsene Wenger quits Emirates Stadium.

Chelsea, who made serious moves for Guardiola in the past, will also be in the running if the hierarchy decide that Jose Mourinho is unable to arrest the team’s shock decline.

Ancelotti is the most attractive out of work manager who Chelsea could ask to replace Mourinho mid-season, but the Italian is now destined for Germany next summer.

Manchester United have distanced themselves from the possibility of moving for Guardiola, with the plan for Louis van Gaal to continue for the remaining 18 months of his contract.

United backing: Van Gaal's job is expected to be safe if he clinches top-four finish

United backing: Van Gaal’s job is expected to be safe if he clinches top-four finish

Guardiola took over at Bayern in 2013 after a year-long sabbatical and has guided the German giants to back-to-back Bundesliga titles.

Speaking after Bayern’s 1-0 win over Darmstadt on Tuesday night, Guardiola refused to comment on questions about his future.

“Tonight, I have no answer,” he said at his post-match media conference. “Next week there will be clarity.”

Last month, the Bayern chairman Karl-Heinz Rummenigge revealed that the Bundesliga giants had yet to enter negotiations over extending Guardiola’s stay but said talks were scheduled to take place after Bayern’s match against Hannover on Saturday.

“It is not planned to push back that date,” said Rummenigge. “We have always said there will be a decision in 2015. I know that it’s late, just days before Christmas. But the talks will be held after the Hannover match, and we’ll then announce a decision.”