There are lots of allergies/sensitivities recorded, in general, as well as vitamin deficiencies that can cause rashes. However, after reading the previous AW rash threads, to me, cleaning appears to be the most overlooked/misunderstood/unbelievable (i.e. in denial) aspect/culprit.
I clean my watch at least once daily. If only light activities (e.g. little to no sweating), I often just use an unused dishcloth/towel and steam (i.e. breath). Otherwise, it’s a wipe down with 50 - 70% isopropyl alcohol.
Apple said:
Is it OK to use a disinfectant on my Apple Watch?
Using a 70 percent isopropyl alcohol wipe, 75 percent ethyl alcohol wipe, or Clorox Disinfecting Wipes, you may gently wipe the exterior surfaces of your Apple Watch and your Solo Loop, Sport Band, Nike Sport Band, or metal band. Don't use on fabric or leather bands. Don't use products containing bleach or hydrogen peroxide. Avoid getting moisture in any openings, and don’t submerge your Apple Watch in any cleaning agents.
Learn how to clean your Apple Watch and band.
support.apple.com
Admittedly, I often have at least a little redness where the sensor dome makes contact, but there’s no irritation or longstanding appearance. Furthermore, I do not wear the watch while sleeping, which allows several hours for the skin to ‘breath’, etc. The tightly pressed sensor dome creates non-ideal (longterm) conditions for skin, although, ideal conditions for some unhelpful growths.
@gotohamish Your problem is probably:
easy to catch some crap under the watch that can cause issues
I go with the others and suggest you give it a full bath as it sound like something got on it that is irritating your skin.
Even though you mention not having problems before, this could be the “perfect storm” situation.