It has been reported that new Watford manager Walter Mazzarri is keen on signing the former Tottenham Hotspur winger this summer.
It has been reported that Crystal Palace, West Bromwich Albion, West Ham United and Southampton are also interested in Townsend.
Earlier this week, The Mirror claimed that Liverpool want to recruit the 24-year-old in the summer transfer window.
Townsend joined Newcastle from Premier League outfit Tottenham in the January transfer window.
The Englishman scored four goals and created 26 chances in 13 Premier League appearances for the Magpies during the 2015-16 campaign.
The winger had a pass accuracy of 82% and a shot accuracy of 74%, and won 27 dribbles and 22 tackles.
Rafael Benitez’s side got relegated from the Premier League at the end of the 2015-16 campaign and will feature in the Championship next season.