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→Current Key
The current key tells us what scales and modes we can play on lead to naturally fit in. If a piece is in the key of E Major, the E Major scale or its relative modes will be the best choice to fit in. The keys removed by one degree in the circle of fifths should also work well. So, a fifth above E is B and a fifth below is A. A and B Major should both work relatively well in the key of E Major, depending on how the notes uncommon to both scales are used and when they are used (over which chords).
For many songs, the chord progression strictly follows the key, using all diatonic chords. However, if the harmony uses a non-diatonic chord, we may need to take that into consideration and avoid certain notes (or flatten/sharpen them)...or changes change scales completely.
Even if the piece features numerous non-diatonic chords in the harmony, it's still a good idea to know what key the piece is in, and particularly if there is a strong tonic note. This is the basis of your phrasing - creating tension by moving away from the tonic and releasing it by ending a phrase on it.