For now, make sure you're reading to her (well, as much as you can, it gets kind of tricky at this age when all they want to do is grab the book and eat it). Learning to read at this age is more about familiarity with books and print and the sounds of language (the idea that you start at the beginning of a book and go to the end, read left to right, top to bottom, etc). Also, it is good for children to hear the general rhythm and pattern of language. As she gets older, you can work on rhyming words, breaking words into sounds, putting sounds together to make words, things like that.
According to "the research" you can teach some children to read as early as 3 or 4, many aren't ready until 5 or 6. Prior to that, it's all about readiness, especially the sounds that letters make. Knowing the sounds that letters make is actually the most important predictor in later reading success. But definitely make it fun, use things like alphabet blocks, fun stories, things like that.
I'm not sure about any books specifically, I've got a couple of degrees in education with a whole lot of focus on reading, so that's where my knowledge comes from, but I haven't looked for a good book specifically for teaching at home. I'm sure if you read the homeschooling thread, I know they've got books that they use with their LOs that seem to work well.