Azula had definitely seen that pouch. There weren't many things that could hide in there, but there were certainly a few dangers- small blades. Poisons. Explosives. Perhaps a small firearm, a threat she'd learned about back in the city. It could even be some completely new threat she was unfamiliar with.

She doesn't actually react defensively, but she does keep her muscles tensed for movement in case she needs to defend herself quickly.

"Then what, I wonder, is the point?