Ah this finally worked and I did not have to unpair the watch from the iPhone. It seems like the key is to disable developer mode on the iPhone and then restart both devices. Now my watch is back in the list of my devices. And it seems like this has also fixed the other issue that Xcode is unable to connect to the watch: https://forums.developer.apple.com/forums/thread/734694?page=2
Topic:
Developer Tools & Services
SubTopic:
Xcode
Tags: