He can indeed, and guess from that comment that she's probably been watching for at least a little while, given that he just sold all the complete potions he had.

"A man's arrived recently who can make people sick with his very presence," he replies. "I thought I'd hand these around to try and counter his magic." He sees little point trying to lie; a servant of Nocturnal isn't likely to care what he does or doesn't do to someone who falls more under Peryite or Namira's sphere of influence.