"I have a really good relationship with him and a lot of respect. He is a genius because he's always tried to do something special on the pitch."

City are currently 14 points behind league leaders Liverpool in the title race but Ancelotti believes the reigning champions will help gauge Everton's Premier League revival, which has brought consecutive victories since the 60-year-old took charge from interim boss Duncan Ferguson.

"Against City this is a fantastic test to see where we are at," said Ancelotti, whose side face Liverpool in the FA Cup on Sunday.

"Maybe City are not at the same level as last year but Liverpool won all their games except one, that is the difference.

"City remain a fantastic team, with a fantastic manager, and it will be really tough to compete with them but we can have confidence to do our best.

"I think at this moment it is good to have this kind of test, also against Liverpool. We have to be happy to compete against the top team in England and in Europe."

Ancelotti insists he has not been surprised by his winning start and paid tribute to the groundwork done by Ferguson.

"I am not surprised because of the spirit in the team," he said. "The work that Duncan did was really good.

"He increased the spirit of the team and so I found players with character and good attitude.

"This was the reason I didn't change a lot. We also haven't had time to change a lot of things.

"It's not the period to make changes, we have to focus on the games. It can be dangerous to change a lot because players can be confused.

"We have changed a little bit defensively and the players have adapted really well.

"I hope the players can continue because the games will be getting difficult."

Ancelotti will talk to the club about the transfer window next week but insists he is happy with the current squad.

"The market is not open yet," he said. "It will open tomorrow. There are a lot of rumours and speculation but that is normal, it happens everywhere in the world.

"I said after January 5 we will have a meeting with the club to see if we can improve the squad.

"But it is a good squad. I didn't know some of the players but I have a better relationship now and I know them better."

Meanwhile, Ancelotti has revealed he has been out in the streets of Liverpool having selfies taken with fans.

"I am a manager but I like to live a normal life," he said. "I like to go to restaurants and to meet people.

"I have had the opportunities for selfies with supporters. I don't want to spend all my time in my house or at Finch Farm 24 hours a day."