Ok, 1200 is almost always too low for anyone, especially if you are active at all. Current stats would be helpful. Height, weight, sex, activity level, etc.
You will definitely NOT gain muscle on that kind of calorie deficit and will most likely LOSE muscle as you lose weight. The goal is FAT loss, so you need to eat properly to lose fat and not muscle.
A week is really not enough time to judge any type of new exercise/diet program. You are making a lot of big changes in a short time and this is a shock to your body. 1 lb a week is totally acceptable weight loss, depending on your current stats. As much as we would all like to lose 10 lbs a week like The Biggest Loser, this is neither sustainable nor healthy :(
The side effects of allergy medications keep some people from using them. Natural remedies can be a great alternative, but some are more effective than others.