My order of play is:
-Pop up on the watch: "Password Failed Please re-enter your iCloud password on your iPhone"
-Pop up on the phone lock screen: "Apple ID Verification Enter your Apple ID password in Settings"
-Go to settings, at the top of the screen, red exclamation point under my name, click in there and it says: "Update Apple ID settings, Some account services require you to sign in again"
-Click continue, prompted with pop up to enter in Apple ID password.
I am not sure if this is somehow linked to the whole new Apple Pay Cash thing, as that was a big part of the watchOS 4.2 update, in conjunction with the 11.2 update. The iphone 5s natively does not support Apple Pay, and the watch could be trying to do some sort of daily validation which is failing because of the 5s not supporting Apple Pay/Apple Pay Cash.