After updating to the new version of Minecraft for xbox as stated here, the game's cursor started to have a jittered movement. This is because the cursor seems to move based on the pixels around the screen now, rather than the based movement by hand. This also triggers input delay for several users, and makes PVP or just the general experience very annoying in several ways.

Reproduction example

While in a container/inventory or start screen, try to move your mouse and notice how the cursor in-game moves. It indeed seems to move based on the pixels around the screen, rather than realism.

The cursor of the game also changed from the one used in Xbox in general, to a pixelated one from the Minecraft itself MCPE-163504. Could this be the reason this issue happens?

It looks like the new GDK version of the game forces you to play with the pixelated cursor from minecraft, rather than the one used from Xbox.

Note that this only started to happen after the new performance update. This also affects the preview version of the game, possibly since its initial release.