The pop star wasn't expecting a J-14 reporter to grill him about his pal's rumoured romance at the Z100 Jingle Ball at New York City's Madison Square Garden and the question caught him off guard.
The singer smiled awkwardly and said, "I don't know if they're talking about what has happened between them."
He quickly gained his composure and added, "I'm happy that they're good friends... She's a lovely girl."
And Swift's pal Ed Sheeran, who also performed at the event, was thrilled for his fellow Brit, adding, "He's lucky to be with Taylor. She's a very warm, loving person. And she kind of spreads that around to her fans and family and friends. I think if a guy pinned her down, they'd be happy."
Meanwhile, Swift and Styles have been spotted vacationing in the Lake District, England, where they posed with fans while shopping in tiny Bowness on Windemere.
Insiders suggest the Love Story singer will be celebrating her 23rd birthday there with Styles on Thursday (13Dec12).
Locals spotted the couple at the town's Pandora store and Swift was reportedly carrying bags from Beatrix Potter World, a store dedicated to the works of the beloved writer.