I have already remove a sender from exchange action center. I also ran the following command Get-BlockedSenderAddress on powershell to cross check if the sender has been removed.
But I'm still getting Remote Server returned '550 5.1.8 Access denied, bad outbound sender'
Is there any other solution?
The self-service method is not instantaneous, it still takes some time for the account to be "released". If you are still getting the issue, you can always contact O365 and ask them to do the unblocking themselves.