Pep Guardiola is smarter in implementing strategies when he has to face big matches, but it is not impossible for Arsenal to beat Manchester City, as proven when many predicted that against Wolves would be the next victory for Manchester City but it turns out the opposite happened and Wolves only had one shot on target which managed to become a goal because Wolves' other goal was due to mstake by a Manchester City player.
In fact, this season Manchester City is getting stronger, whether with additional players or not, they still have good statistics to continue winning trophies this season in the Champions League. I believe Pep Guardiola already has everything at this club, solid players and given the freedom according to what Pep Guardiola wants. However, facing Arsenal, which incidentally is one of the most stable clubs in the Premier League, is certainly a challenge for Pep Guardiola. Last season Manchester City was able to win easily. It's just that currently, Arteta has learned a lot from last season's defeat so there will be a little difference in Arsenal's game later.
Apart from that, Tottenham will continue to extend its winning trend so we will see Spurs temporarily leading the top of the standings if they manage to get full points over Town before Manchester City play Arsenal. And in my opinion, this match should not be an obstacle for Spurs. With such a big difference in strength, I'm sure Spurs will easily beat Town alone.
It is an important game for both sides and while I don't think there is too much focus on the rivalry between Pep Guardiola and Mikel Arteta, the general rivalry between the two teams is of course huge as they both know it might again be them who are fighting for the title in the end.
In my opinion one of the most important players of this season for Manchester City so far is Julio Alvarez. He has had a good last season, but this season he is advancing to the status of a key player of the Manchester City game. He can score, he can assist, he is great both with and against the ball and in times when Kevin De Bruyne goes missing, I think Pep Guardiola is the happiest manager around to have Alvarez on his team as this gives Guardiola additional options for possible team formations. Alvarez is flexible and can play different roles and Guardiola likes that type of player.
It is going to be a big encounter and I am not sure whether Manchester City has still an endge? I think they do like they do in every game.