The Portugal international this week joined the German side for the rest of the season with a view to a permanent switch.
There have been reports since the transfer was concluded on deadline day that Cancelo had become a disruptive figure in the dressing room after falling out of favour in recent weeks.
But Guardiola, whose City side are five points behind Premier League leaders Arsenal, said the 28-year-old wanted regular football.
"I wish him the best for the rest of the season, these four months. Next season I don't know what will happen," he said.
"After the World Cup, we made a 'pre-season' and started to play in a different way in some patterns. I liked what I watched and I decided to give more time to players who I saw on the pitch.
"He is a guy who needs to play to be happy and we decided together, all three parties, to let him go to Munich. He wants to play every single game and hopefully that can happen in Munich."
Cancelo has won two Premier League titles and two League Cups since joining City from Juventus in 2019, with his ability to play as an extra midfielder once seen as crucial to Guardiola's side.
Guardiola, whose team travel to Tottenham on Sunday, said City would be without defender John Stones for up to a month after he suffered a hamstring injury in last week's FA Cup victory over Arsenal.
"It's three weeks, one month (out)," said Guardiola. "Unfortunately, a lot of games."
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