Magic Mouse 2 pointer not working after macOS Tahoe update

The mouse seems to connect properly, is able to use the top button but it is not able to move the pointer. It has been working for nearly 3 years without issues, and looking at the movement sensor from a cellphone's camera, it does show a faint blinking violet light, which might confirm the mouse actually works. When connected to the USB Cable, it does report the firmware version as 8.7.4, and when connected directly over bluetooth, it shows the 3.1.1 version. What should I do to restore its functionality?

[Re-Titled by Moderator]

Original Title: Magic Mouse 2 (USB, no external batteries) suddenly is not able to use the pointer after update to Tahoe 26.0.1