Guardiola kept Sterling's feet on the ground by saying "he can do better" after a match that was level until a controversial opener just after half-time.
Isaac Success believes Watford will learn from their 3-1 loss to reigning Premier League champions Manchester City on Saturday.
Guardiola said: "I would prefer him to stay but at the same time I want to feel he wants to stay too".
"Next season we won't be having this conversation and we will be clear". "We are now investigating these matters and will allow Manchester City every opportunity to explain the context and detail surrounding them".
Tuesday sees us face Schalke in the Champions League, before next weekend's trip to Swansea in the FA Cup.
"It is so complicated, there are no spaces - just the talent of the players that we have".
Sterling completed his treble with a smart finish, but the way the England global opened the scoring brought with it the Premier League's latest offside controversy.
"He's gone to a big club [Liverpool] when he was very young, dealt with that and got himself in the first team, then made a big move with a big profile to Manchester City and dealt with that".
Burnley scored at 12.06pm yesterday (the sixth minute of a midday kick-off), the earliest that Liverpool have conceded a goal since Kevin Campbell scored at 12.05pm against... This week we have three games in three different competitions which allow us to go through or out - especially in two.
The introduction of Troy Deeney and Gerard Delofeu immediately paid dividents for the visitors as the pair combined within thirty seconds of coming on for Delofeu to pull one back in the 66th minute.
Gundogan is seemingly in no rush to extend his terms at the Etihad Stadium and, after a performance against Watford he described as "incredible" by "an incredible player in all senses", Guardiola chose to apply a little more gentle pressure.
He explained City were keen for it to be introduced in England's top flight this season, only for consensus with other clubs to prove elusive.
Sterling's opening goal following a goalless first half was awarded after originally being ruled out for offside.
"The investigation is open, so I hope they can finish as soon as possible and UEFA can decide".
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