And when neither party denied the rumours of their courtship, we pretty much assumed it was the real deal.
However, all is not what it seems.
According to HollywoodLife.com a source close to Taylor has revealed that the singer is simply going along with the rumours in order to make her ex Conor Kennedy jealous.
Surely this isn't the case?
The source said: "She isn't denying in any way the reports of the people talking about her having a relationship with Harry because she wants to make Conor jealous and the way she thinks she is making him jealous is to show him that she has options.
"But in reality, she actually wants Conor and is just doing this to 'Wear the pants in the situation!' She has no interest in making the Harry thing work."
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OK, now we are officially confused.
Onlookers said that the two appeared deep in conversation as they joined two older friends and their baby.
Stalkers Fans of One Direction had been following Harry around the city and took to twitter in shock with one writing: "Just saw Taylor Swift. Holy c**p!"
Taylor and Harry allegedly first dated in March of this year after they met at the Kid's Choice Awards.
However, on seeing pictures of Harry with another girl in Australia, Taylor reportedly broke things off and started dating Conor Kennedy in July.
So are they or are they not a couple?
At this point, who the heck knows?