A source told UK's LOOK magazine (via Bang Showbiz): "They like each other. Katy and DJ Diplo are casually dating, but she's developed a huge crush on Harry, which she calls unexpected."
The insider noted, "He looks up to Katy and loves that she isn't your typical needy twenty-something," but added, "I think he's concerned Katy's playing him to get back at Taylor for supposedly bad-mouthing her. Harry reached out to Katy because if anyone knows how Taylor can be sometimes, it's him. Katy was touched and asked him to dinner. She's enjoying it, but there may be a little element of revenge behind it too."
According to the report, the source explained that Taylor's "shocked," adding, "Katy dating an ex? Yeah, that would hurt."
Gossip Cop further shoots down the idea that Harry and Katy went out together (they didn't) just to upset Taylor, with a source telling the site, "This is ludicrous."
We couldn't have said it better ourselves.