Mouse pointer doesn't reflect windows status (hand, I-beam, resize)

When using Windows 11 on an M1 Mac, I've noticed that the mouse pointer is always the *Mac* mouse pointer, and not the visual cursor as defined by state of windows. E.g. when I hover over text in Word, I don't get the I-Beam cursor, or when trying to resize a window, I don't get the 45def double-headed-arrow.

Is there a setting I've missed with this?
Using:
- macOS 13.0.1
- Windows 11 22621.819 Enterprise
- Parallels 18.1.0 (53311)

I have reinstalled Parallels Tools inside the VM just now, based on some results from another thread, and I didn't see any change. It feels like I'm missing a setting somewhere?

Yours,
Dominic