He scored his first goal for the Hornets in their FA Cup win over Burton at the weekend - the same competition he scored his only goal for the Reds, against Exeter, in last season's third round.
“To me, it was an exciting opportunity to further my career at a club that's growing," Sinclair said.
“I played here in an FA Youth Cup tie three years ago, and one side of the ground was missing – so you can see how much the club has progressed.
“We're trying to cement our place in the Premier League and kick on towards those European places. It is very important for the young players here to see there is a pathway to the first team."