One of the first yarns I go to when knitting for babies is the Comfort Cherish Range from King Cole Yarns
The yarn is so smooth to knit with and glides off the needles.
I have knitted so many little cardigans and outfits with this yarn and the finished knitwear always has good stitch definition and is so soft against babies delicate skin.
The yarn is machine washable (most important when knitting for little ones) and washes and wears well.
I knitted this romper set from my Charlie baby knitting pattern