The 24-year-old is on loan from Wigan Athletic until the end of the season after failing to break into Roberto Martinez’s squad.
The former Crystal Palace midfielder has featured five times for the Baggies since joining on loan in February and scored his first goal for the club in Saturday’s 3-2 win over Preston North End.
Watson told the club‘s official website: "They are a great set of lads and it's nice to come here and play football in a winning team and a team fighting for promotion. It would be nice to stay on but we will just take it one step at a time.
"We will take it to the end of the season and then see where we are. I just want to play as many games as I can and help this team achieve promotion.
"I am living in Birmingham. It's fine. I have lived in a few places but hopefully I am settled now and hopefully I can unpack the suitcases."
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