Parallels 16: mouse cursor keeps getting trapped even though tell it not to

I have disabled "optimise mouse for games" but still I keep getting the cursor trapped in a VM window and told I have to CTRL+ALT to free it. I've been using Parallels for years and never had this issue (I never even knew it was a feature) but suddenly it is doing it almost every time. Both in windowed or full-screen mode.

It is VERY annoying. What am I supposed to do? I don't think this coincides with any update to either Parallels or MacOS. About a hundred times a day I try to move mouse between my two monitors and realise it's not working.