No DAW sound (there is input sound from guitar) in Cubase AI 9.5 (Mac M1)

Hey everyone, I’m facing a perplexing issue in Cubase 9.5 with my DAW (Steinberg URmkII) and I’m hoping to get some guidance.

Basically I can hear the clean tone through the headphones if setting the “MIX” knob to the “INPUT” position, unfortunately there is no sound at all when setting the knob fully to “DAW” (despite showing signal in cubase). For reference, I am connecting my guitar to the 2nd input line and enabling the Hi-Z in input 2.

I have set the Studio setup > VST Audio System driver to my Steinberg URmkII, and the audio connections to the corresponding input/outputs.

I have also checked the guitar/USB cables (they seem ok), restarting the laptop (Mac M1), and playing with different settings, but can’t resolve this issue.

Has anyone else encountered a similar problem before? Your insights and solutions would be greatly appreciated!

As a new user, I can’t upload more than one photo in the post, so I will include them below: